Monday, August 11, 2008

Not So Fast -- Report Questions Drop in Auto Premiums

Driver Mileage Cutback May Not Drop Premiums, Report Says
(c) NU Online News Service, Aug. 8, 9:09 a.m. EDT

Despite the fact that U.S. motorists are driving less in the face of higher gasoline prices, increasing repair costs may keep auto insurance rates from declining, a new report says.

San Francisco-based Quality Planning (QPC), which questioned drivers for the study, said it is projecting a mileage decrease of 4-to-5 percent over the next 12 months.

However, the firm--which validates policyholder information for auto insurers--said drivers expecting to see lower insurance premiums because they cut their mileage “may be in for a surprise.”

The price of oil, it was noted, “has had a similar dramatic impact on the parts that go into our cars and trucks.” QPC mentioned that petroleum is used in rubber, plastic and polyester parts, making them more expensive to produce.

“These higher costs will be reflected in higher loss severity and, as a result, will act as a counterforce to the reduction in annual mileage,” the report said.

However, while less driving may not result in a cutback, it may hold the line on some auto insurance premium prices.

To read the rest of this article, click here.

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